Dow Jones Falls On Coronavirus Fears; Amazon Leads 3 Stocks Flashing Buy Signals
Dow Jones Industrial Average and S&P 500 fell after Friday’s open as China’s coronavirus continued to spread, along with some weak earnings results from Dow Jones components. The Nasdaq erased a small gain at the open as Amazon stock skyrocketed on blowout earnings.
That follows strong stock market rally action Thursday despite coronavirus fears. In addition to Amazon.com (AMZN), Vertex Pharmaceuticals (VRTX) and Western Digital (WDC) flashed possible buy signals on earnings.
Amazon stock skyrocketed early, hitting a record high and a return to the $1 trillion club. Meanwhile, Vertex and Western Digital climbed at the open, suggesting possible entries. But none of them were as clear-cut as Amazon stock.
IBM stock also rose, taking a step toward its own buy point from a dubious-looking chart. Shares popped with IBM (IBM) Chief Executive Ginni Rometty stepping down.
Dow Jones Futures Today
Dow Jones industrials fell 0.8%, the S&P 500 lost 0.5% and the Nasdaq eased 0.2%. The tech sector is performing better. Amazon stock is a major S&P 500 and Nasdaq component. IBM stock is a Dow Jones and S&P 500 component.
Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session. Dow Jones futures signaled Thursday’s weak open, but not the strong close.
Dow Jones giant Visa (V) late Thursday missed on sales and gave cautious guidance. Visa stock was down 2.7% early Friday.
Friday morning, Dow Jones component Caterpillar (CAT) topped fourth-quarter earnings views but missed on sales and gave weak guidance. Exxon Mobil (XOM) fell short on earnings and revenue. Fellow Dow Jones energy giant Chevron (CVX) beat on earnings, but missed on sales.
All three stocks fell somewhat before the open. The trio of Dow Jones stocks have tumbled in recent days as crude oil and industrial commodities futures have fallen on coronavirus concerns.
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China Coronavirus Outbreak News
The World Health Organization declared Thursday afternoon that the coronavirus outbreak is a global public health emergency, after previously declining to do so. However, World Health officials did not recommend limiting trade and travel due to the virus, while the U.S. discouraged travel to China. Airlines have been scaling back flights to the country.
China coronavirus cases rose to 9,692, with 1,982 virus cases added Jan. 30. The virus has claimed 213 lives, all in China.
Several dozen coronavirus cases are out of mainland China. The U.K. on Friday confirmed two coronavirus cases, both from the same family. Russia confirmed its first virus case.
In the U.S., the Centers for Disease Control confirmed a sixth coronavirus case on Thursday. Starbucks (SBUX) has closed thousands of China stores. More companies are extending Lunar New Year holidays to try to prevent the spread of coronavirus. That could affect hundreds of companies with supply chains or production in China.
Current Stock Market Rally
The current stock market rally struggled early on with coronavirus fears, but then rebounded after World Health officials didn’t recommend travel and trade restrictions. The major indexes all closed near session highs, erasing significant intraday losses.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) rose 1 cent yesterday. The iShares Expanded Tech-Software Sector ETF (IGV) jumped 1.3% to a new closing high. Microsoft (MSFT) and ServiceNow (NOW) rallied on earnings and several other top stocks advanced.
Also Thursday, the VanEck Vectors Semiconductor ETF (SMH) fell 0.2%, but slashed intraday losses after finding support at its 50-day moving average as AMD (AMD) rebounded. The chip sector was the clear stock market rally leader in late 2019, but it’s now gone sideways since early December. Coronavirus concerns about the demand and China supply chains are taking their toll, along with some 5G worries.
While the Dow Jones today tested its 50-day line, the stock market rally is trading within its recent coronavirus range starting from last Friday. A few days or weeks of sideways action would be ideal, letting the 50-day lines catch up to the more-important S&P 500 and Nasdaq composite.
Amazon earnings unexpectedly rose 7% to $6.47 a share with revenue up 21% to $87.4 billion. Analysts expected Amazon earnings to tumble to $4.05 a share on revenue of $85.97 billion. Amazon Web Services revenue grew 34% to $9.95 billion, also beating.
Amazon’s huge cloud computing unit is showing slowing growth as Microsoft, IBM and others step up. But AWS is still expanding quickly and generating huge profits, as opposed to the thin margins in the core e-commerce business. The e-commerce giant ended the fourth quarter with 150 million Amazon Prime members.
Amazon stock spiked 8 to 2,017 after Friday’s open. Shares gapped above a 1,917.91 saucer-with-handle buy point. Amazon stock cleared its 2,035.80 July high and the September 2018 all-time high of 2,050.50.
The relative strength line for Amazon stock has been trending lower since late 2018, but is spiking Friday with Amazon stock. Investors can use the opening price of 1,805 as a buy point.
Vertex earnings rose 31% to $1.70 a share. Sales surged 62% to $1.41 billion, the best gain in years. That includes $420 million for Vertex’s new cystic fibrosis treatment Trikafta. Analysts expected Vertex earnings per share of 96 cents on $1 billion in sales.
The biotech giant also gave bullish 2020 revenue guidance.
VRTX stock popped at the open but gave back some gains and was up 1.2%. early Friday. The stock is rising from support at the 10-week line and scored an all-time high. Vertex stock broke out past a four-weeks-tight buy point of 225.76 earlier this month, but had pulled back somewhat over the past several sessions.
Edwards Lifesciences Earnings
Edwards Lifesciences (EW) earnings rose 25% to $1.46 a share, with revenue up 20% to $1.174 billion. Analysts expected Edwards earnings of $1.48 per share on $1.16 billion. The medical products giant also gave strong 2020 guidance.
Despite the earnings miss, EW stock jumped at the open. But shares quickly reversed lower, leaving EW right back below its 50-day line. Shares are working on a flat base with a 247.74 buy point. But it also has a possible early entry of 245.81.
Western Digital Earnings
Western Digital earnings fell 57% to 62 cents a share in its fiscal second quarter on flat revenue of $4.234 billion. Analysts expected Western Digital earnings of 58 cents a share on revenue of $4.2 billion.
The memory-chip maker also guided higher on the current fiscal third quarter.
WDC stock rose 1.6% to 68.41 early Friday, not far from last week’s 18-month high of 72. Shares are in range from a 65.41 buy point. WDC stock has held up better than many other chip stocks in recent days, but it hasn’t had nearly the run of the true leaders.
In any case, WDC stock could be actionable with an earnings gap on Friday morning, especially if it clears 72.
IBM CEO Ginni Rometty Exits
Ginni Rometty will step down as IBM CEO, effective April 6, but will remain chairman through Dec. 31. Rometty has been CEO for the past eight years. For years, IBM has struggled to generate sales growth, but Rometty has made an effort to expand cloud-computing offerings, acquiring Red Hat last year.
Arvind Krishna, head of IBM’s cloud unit, will take over as CEO. Jim Whitehurst, the former Red Hat CEO, will be president.
IBM stock rose 4.6% to 143.10 early Friday, pushing back above its 200-day line. Shares fell 0.7% to 136.77 on Thursday. IBM stock is working on a cup-with-handle base with a 145.89 buy point, according to a Marketsmith analysis. But it’s had a series of failed breakouts.
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